11 Competitive AdvantageThe key superior performance is to gain and hold a competitive advantage through differentiation of product offering, which provides superior customer value or by managing for lowest delivered cost.

12 Competitive AdvantageCompetitive advantage is the advantage over competitors gained by offering greater value either through lower prices or by providing more benefits that justify higher prices.

17 DifferentiationTo be unique in the industry along some dimensions that are widely valued by buyersPremium price for product; but cannot ignore cost position (still should decrease cost)Differentiation: product/ distribution/ sales/ marketing/ service/ image, etc.

18 Focus To be best in a segment or group of segmentsTwo variants: cost focus & differentiation focus

38 Viral Marketing Viral Marketing is the key to success.marketing techniques that use social networks to produce increases in brand awareness or to achieve other marketing objectives (such as product sales) through self-replicating viral processes, analogous to the spread of computer viruses.It can be word-of-mouth delivered or enhanced by the network effects of the Internet.Viral promotions may take the form of video clips, advergames, text messages.

39 Word of Mouth MarketingDifferent possibilities to create a big effect with small budget:Word of mouth marketing is a highly valued marketing tool for advertisersThe receiver of word-of-mouth referrals tends to believe that the communicator is speaking honestly. The receiver relies on the information.A very successful word-of-mouth promotion creates BUZZ.

40 Word of Mouth MarketingFour different rules to produce good word of mouth marketing;Be interestingSmart idea: is always a key successful businessFind a megaphone: via Blogs, YouTube,Build trust: through emotional and excellent service & CRM

50 Zappos Online: Shoes, Bags, Accessories, etcDeeply engage with customers and employeesStarted in San Francisco (IT)  move to Las Vegas (Hospitality)Now current employees is 1,600Pay employees to quit $1,000 (starting from $100  $500 and now $1,000)Company is bigger & bigger keep quality10% of new recruits quit4- week: company culture/ value/ stress/ commitment/ customer service trainingOne more week in Kentucky for warehouse and shippingIf not the right fit, company pays $1,000 bonus to quitExtraordinary customer service

51 Zappos Grow successfully because of **Frontline**Lots responsibilitiesNo scriptsNo time limitAuthorized from company to make customers satisfy

52 Zappos Viral Marketing: customer serviceOne customer bought 15 pairs of shoes for her mothers, 2 weeks return/refund policy.Customer service sent to remind.Found out that her mom was sick, and no time to send them back (UPS).Customer service sent UPS to pick up with flowers and card for her momThe customer post her appreciation on internet blog, within a week viralBrilliant PR

53 Blue Ocean StrategyThe reason of the appearance of the Blue Ocean StrategyIncreasing numbers of industries and supply exceeds demandglobalizationaccelerated commoditization of products and servicesincreasing price warsshrinking profit marginsbrands are becoming more similar select based on price

54 Red Ocean VS. Blue Ocean Red Ocean Strategy Blue Ocean StrategyCompete in existing market space.Create uncontested market space.Beat the competition.Make the competition irrelevant.Exploit existing demand.Create and capture new demand.Make the value-cost trade-off.Break the value-cost trade-off.Align the whole system of a strategic firm's activities with its choice of differentiation or low cost.Align the whole system of a firm's activities in pursuit of differentiation and low cost.VALUE INNOVATION

55 BOS Logic: Reconstruct market boundariesBoundaries ofCompetitionBOS Logic: Reconstruct market boundariesHead-to-HeadCompetitionCreatingNew Market SpaceIndustryFocuses on rivals within its industryStrategic GroupFocuses on competitive position within strategic groupBuyer GroupFocuses on better serving the buyer groupScope of Product and Service OfferingsFocuses on maximizing the value of product and service offerings within the bounds of its industryFunctional-emotional Orientation of an IndustryFocuses on improving price-performance with the functional-emotional orientation of this industryTime/TrendsFocuses on adapting to external trends as they occurLooks across alternative industriesLooks across strategic groups within its industryRedefines the buyer group of the industryLooks across to complementary product and service offerings that go beyond the bounds of its industryRethinks the functional-emotional orientation of its industryParticipation in shaping external trends over timeThere are a clear pattern for creating blue oceans, with six basics approaches to remarking market boundaries: The six paths frameworkIn the first path companies in the red ocean define their industry similarly and focus on being the best within it. But to create new market space companies must look across alternative industries because a company competes not only with the other firms in its own industry, but also with companies in those other industries that produce alternative products and services.The second path: The next boundary is the strategic group. A strategic group is companies within an industry that pursue a similar strategy.The key in creating new market space is to understand what factors determine buyers´ decision to switch from one strategic group to another.The third path: In most industries, competitors converge on the definition of the target buyer. In the reality, though, there is a chain of buyer who directly or indirectly involved in the buying decision: the purchaser, the user, for example.But by looking across buyer groups, companies can gain new insights into how to redesign their value curves to focus on a previously overlooked set of buyers.The fourth path: In the red ocean: few products and services are used in a vacuum. In most cases, other products and services affect their value. But companies can create new market space by focusing on the complements that detract from the value of their product or service.The fifth path: Competition in an industry tends to converge around two bases of appeal:-Some industries compete principally on price and function, their appeal is rational. Other industries compete largely on feelings, their appeal is emotional.Companies can find new market spaces when they are willing to challenge the functional-emotional orientation of their industry.The sixth path: All industries are subject to external trends that affect their business over time. Firms tend to pace their own thinking to keep up with the development of the trends they are tracking.By finding insights trends that are observable today, firms can unlock innovation that creates new market spaces.

56 Value innovationIt is a new way of thinking about and executing strategy that results in the creation of a blue ocean and a break from the competition.The value-cost trade-off:either create greater value to the customers at higher cost or create reasonable value at a lower cost.BOS pursues differentiation and low cost simultaneously.